The company hopes to broaden the demand for the device by allowing users to play "casual" games such as solitaire, and to play digital music and movies through it.
Microsoft plans to ship as many as 3 million units in the first 90 days after launch, and few analysts believe the company will have trouble selling them.
But Sony and Nintendo expect to sell large quantities of their game machines when they come to the market, and each has a strategy for taking on the competition.
Sony, hoping to build on its successes, is attempting to lure former PlayStation customers through backward compatibility; users will be able to play any of the 13,000 games developed for the PlayStation 2 or the original PlayStation on the new machine, the company says.
Sony also hopes to take a page out of its playbook from the PlayStation 2: It launched that machine, which played games stored on DVDs, when DVDs were becoming a mass-market phenomenon.
The company is looking to repeat success with the PlayStation 3 -- the only new game console that will play games and movies stored on high-definition DVD discs.
The PlayStation 3 will play Blu-ray DVDs, one of two high-definition DVD formats, and when it debuts, the PlayStation 3 will likely be the lowest-priced Blu-ray DVD player on the market.
"We're looking at the PS3 ... as a Trojan horse in the [high-definition DVD] format wars," says Molly Smith, senior director of brand development at Sony Computer Entertainment America.
But the company is also hoping to win fans with what is clearly a very sophisticated piece of hardware. In addition to the Blu-ray drive, the PlayStation 3 will incorporate the new Cell processor, co-developed with
(IBM - Get Report)
, which integrates eight CPUs onto one chip; a high-end graphics processor from
(NVDA - Get Report)
; and wireless networking technology.